August Sees Decline in Consumer Sentiment

High unemployment, high mortgage rate and high home prices will cause consumer confidence to fall every time. This should only be a short term trend, however. Please read the article below and let me know what you think.

After achieving a six-year high in July, consumer confidence diminished in August—though trends still indicate an increase in consumer spending over the next year.

The Index of Consumer Sentiment, released twice monthly by Thomson Reuters and the University of Michigan, read 82.1 at the end of August, down from 85.1 in July but an improvement over August 2012’s 74.3. A preliminary report released mid-month showed the index falling to 80.0.

“The August survey indicates that the recent confidence gains have stalled as consumers await decisions on the federal budget and monetary policy,” said Richard Curtin, chief economist for Surveys of Consumers. “Unlike a year ago, consumers do not anticipate that the budgetary issues will engender a similar Congressional stalemate, but few express a great deal of confidence in the economic policies of the government.”

The Expectations Index, a measure of optimism for the year ahead, fell to 73.7 in August from July’s 76.5 but remained above last August’s 65.1. According to Surveys of Consumers, respondents were anticipated the largest income increases since November 2008. However, the median expected increase was just 0.9 percent, smaller than the expected inflation rate.

At the same time, unemployment concerns caused many consumers to question whether or not they’ll see “good” economic times anytime soon.

Meanwhile, the Current Conditions Index was 95.2 in August, down from 98.6 in July but ahead of last August’s 88.7.

While home buying attitudes decline, the group reported home selling conditions picked up, with prices judged as less favorable for buying (the worst since 2007) and more favorable for selling (the best since 2006).